How to Stop Overdrawing a Checking Account

When you write a check or use an account debit card for money not in your account, the bank calls it an overdraft. The bank returns the check unpaid, leaving you with bounced check fees, or covers the check through overdraft protection. Rising overdraft fees can cost $30 to $50 each time you overdraw your checking account. You can't afford to continue overdrawing. Stop with these steps.

Difficulty: Moderate

Instructions

1. Make it a policy to only write checks or make transactions that can be cashed immediately. The days of waiting a few days for checks to clear is over and can easily result in an overdraft. Electronic transfers means money moves from checking accounts much faster, sometimes the same day.

2. Keep track of your auto-deductions. This convenient tool that you use for regular expenses like utilities or insurance has a way of sneaking up on you. If you forget to record them, you overdraw your account. Keep a list of your auto-deductions with your checkbook register. Make certain you record them during or before the pay cycle affected.

3. Record electronic transactions immediately. Often, overdrafts happen when you forget to record store debit card purchases, items bought online or ATM withdrawals. Plus ATM withdrawals may charge extra if you're not using your bank's ATM.

4. Consider getting rid of your debit/ATM card if you can't remember to record purchases. Changing to cash only for consumable products like groceries, vanilla lattes and DVD rentals makes you more aware of spending.

5. Think about when you overdraw your account. If it happens at the end of pay periods, you either spend too much or earn too little. Ask yourself how you can fix that problem.

6. Use that fancy cell phone or smart phone to check your account on your bank's website before you buy something.

7. Balance your checking account. The best way to avoid overdrawing an account is to always keep your account balanced. Check your register against your monthly statement. Follow-up during the month through your bank's website or through the 24-hour automated banking services.

Tips & Warnings

• If you foresee still occasionally overdrawing your checking account, look at linking your checking to your savings account. When you write a check for money that isn't in your checking account, the money comes from your savings account with a small transaction fee that costs less than overdraft charges.
• Remember that deposits may not post to your account on the day that you make them. If you deposit a check hoping to cover a check you write or debit card transaction you make the same day, your checking account may be debited before your deposit is posted, and you'll end up with an overdraft.